Budget 2019: Paving road to recovery by easing loan load

Farm loan defaults are estimated to account for 8.3% of total bank non-performing assets. Banks lend up to Rs 3 lakh to farmers at 7%.

Govt’s announcement of a 2% interest subvention for farmers hit by natural calamities and another 3% relief for timely repayments will help both afflicted farmers and banks trying to recover loans.

NEW DELHI: The government’s announcement of a 2% interest subvention for farmers hit by natural calamities and another 3% relief for timely repayments will help both afflicted farmers and banks trying to recover loans, experts said.

Presenting the interim budget, interim FM Piyush Goyal said the government had doubled the amount of interest subvention over the past five years and crop loans had surged to Rs 11.68 lakh crore in 2018-19. The announcement will help the farming community, said Harsh Kumar Bhanwala, chairman of National Bank for Agriculture and Rural Development.

“Interest subvention of 2% will be provided to farmers pursuing animal husbandry and fisheries who avail of loans through KCC. Further, in case of timely repayment of loan, they will also get an additional 3% interest subvention,” an agriculture department official said.

Farm loan defaults are estimated to account for 8.3% of total bank non-performing assets. Banks lend up to Rs 3 lakh to farmers at 7%. But the effective rate would be 2% for those hit by calamities and repaying on time. “This is an excellent step by the government to promote timely payment of loans and at the same time helping distressed farmers. This will help banks in recovey,” said PK Joshi, director for South Asia at the International Food Policy Research Institute.